While not agreeing with all of the points made by Paul Ferrell of MarketWatch, his editorial on U.S. and Asia economic prospects was thought-provoking. Mr. Ferrell’s premise is that the intransigence of our U.S. Congress is affecting our future economic competitiveness due to lack of investment in infrastructure and insufficient public education. While agreeing with that, he might be overplaying the long-term strength of Asia’s economic prowess.
Asia is a region that still has significant challenges. Japan has been in a rut for the last couple of decades with deflation wrecking their growth prospects. Even with China enjoying remarkable growth, they have encountered some issues recently. Their economy still remains under significant government control with private financing access limited. They also have done a poor job in protecting intellectual property rights, so they must continue to resort to espionage and stealing of commercial secrets in order to maintain their competitive edge. In my mind, that’s not a sustainable strategy.
While both India and China’s urban and coastal areas have experienced great prosperity, there remains large swaths of land where people live in grinding poverty. Their living standards are below the world average and rectifying this from the state level will be very challenging. In China, we are starting to see some chinks in their armor as Chinese workers are starting to demand higher wages. As they transition to a middle-income country, they must find a way to maintain productivity gains as their labor costs rise.
Reverting back to the U.S., it is obvious that Mr. Ferrell is not a fan of the military buildup over the past decade as we try to fight the endless war on terrorism. However, we must realize that military spending is an economic driver and job creator. It also enables us to influence and protect our economic interests abroad that can be compromised if non-market friendly regime emerges. Having said that, it is true that budgetary pressures and other demands within our borders means that we do have to be smarter and more efficient with our defense dollars abroad.
As for infrastructure, this is a point that I most agree with Mr. Ferrell. Our transportation system is in need of more attention and encouraging more investment in natural resources and technology will be a key to maintaining our competitive edge globally.
On the other hand, there have been successes in energy for the U.S. In contrast to Europe whose large investments in alternative energy have yet to pay off, the U.S. has been very successful in natural gas production, which is significantly cutting our energy costs for industry and households.
Mr. Ferrell is also right to be concerned about the state of education, but its solution goes beyond funding. Correcting the culture toward intellectual curiosity and addressing the breakdown in family structures are socioeconomic challenges that must be addressed first before we can see improvement in educational outcomes. Lack of male role models and the prominence of single-parent households are proving to be difficult obstacles to overcome. With demands at work, it appears that child development has suffered as a result when the parental roles are not shared. As a result, the skill gap between the low- and middle-income households relative to high-income households is a major threat to having a diverse, healthy economy.
Even though America’s global economic dominance is starting to wear off, it is too premature to assume that Asia will be able to fully capitalize on it.